Moody's lifts Remington Arms

Moody's Investors Service said it upgraded Remington Arms Co., Inc.'s corporate family and probability-of-default ratings to B2 from B3 and its $200 million 10½% senior unsecured notes due 2011 to B3 (LGD5, 70%) from Caa1 (LGD4, 63%).

The outlook is stable.

The agency said the upgrade reflects the company's strong recent operating performance stemming from favorable demand trends, the benefits of its ammunition price increases and hedging strategies, the positive cash flow the company generated in 2006 following several years of negative cash flows and the prospects for continued modest positive cash flow in 2007.

In April, Remington announced that an affiliate of Cerberus Capital Management, LP planned to purchase the company for $370 million. As part of the transaction, Cerberus intends to contribute $118 million of preferred equity that will pay out existing equity holders and repay $47 million of senior notes that are obligations of parent company RACI Holdings, Inc. Moody's said it expects that pro forma leverage metrics will not materially change from current levels.

Remington's B2 corporate family rating balances its high leverage, exposure to volatile raw material costs, the discretionary nature of its products, the highly seasonal nature of the business, continuing regulatory and product liability risks and the uncertain response of customers to continued price increases against the company's long operating history, leading market positions in key categories, moderate customer concentration and success passing through price increases to date.

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